BAM Co.is evaluating a project requiring a capital expenditure of $806,250.The project has an estimated life of 4 years and no salvage value.The estimated net income and net cash flow from the project are as follows:
The company's minimum desired rate of return is 12%.The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively.
Determine: a the average rate of return on investment, including the effect of depreciation on the investment, and b the net present value.

Question

BAM Co.is evaluating a project requiring a capital expenditure of $806,250.The project has an estimated life of 4 years and no salvage value.The estimated net income and net cash flow from the project are as follows:
  The company's minimum desired rate of return is 12%.The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively.
Determine: a the average rate of return on investment, including the effect of depreciation on the investment, and b the net present value.

Quizplus · Accepted Answer

The Answer of BAM Co.is evaluating a project requiring a capital expenditure of $806,250.The project has an estimated life of 4 years and no salvage value.The estimated net income and net cash flow from the project are as follows:
  The company's minimum desired rate of return is 12%.The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively.
Determine: a the average rate of return on investment, including the effect of depreciation on the investment, and b the net present value.

BAM CoIs Evaluating a Project Requiring a Capital Expenditure of $806,250